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The month of July is historically decent for Wall Street. According to moneychimp.com, a consensus carried out from 1950 to 2022 has revealed that July ended up offering positive returns in 43 years and negative returns in 30 years, with an average return of positive 1.12%.
Improving corporate earnings and expectations of slower Federal Reserve monetary tightening bode well for the equity market. In fact, chances of a 25-bps rate hike are currently priced-in. Hence, we do not expect any rate hike in the month to spoil the market momentum.
Investors’ hope that slowing inflation may hold back the Fed from pushing up interest rates in a very hawkish manner can boost equities throughout the month. But then, economists believe that inflation is likely to remain sticky. And given an upbeat GDP data, a strong labor market and an improving housing market, the Fed may feel like keeping rates higher for longer.
Against this backdrop, below, we highlight a few ETF areas that should win in July.
Electric Vehicles
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report)
The electric vehicle space is charged-up with estimate-beating delivery numbers. Tesla Inc. (TSLA - Free Report) announced a record number of deliveries for the second quarter of 2023. The figures exceed expectations and signal its growing dominance in the electric vehicle market. Rivian Automotive (RIVN) too topped market estimates for second-quarter deliveries on higher production and stable demand for its electric vehicles. Warren Buffett-Backed Chinese EV Maker BYD’s sales almost doubled in June. Its new quarterly record surpassed its prior best.
After an upbeat June, housing ETFs should carry the winning momentum in July too. Homebuilder sentiment has improved considerably. A dearth of existing homes for sale is propelling homebuilders into the limelight despite the prevailing market challenges. This trend, as NAHB’s chief economist Robert Dietz suggests, is likely to persist as potential buyers continue to scout for new construction due to limited available housing inventory. New home listing also marked a significant rise. Plus, chances of a less-hawkish Fed in the future bode well for the sector.
The space should do well despite higher rates and an extraordinary first half. The reason behind the expected rally is the AI boom and more activities in cloud computing. The sector is in high demand due to the rapid emergence of technological advancements.
Ebbing chances of U.S. recession is a positive for investors. The Fed boosted its 2023 economic growth expectations to 1% GDP gain, up from the 0.4% estimate in March. Consumer sentiment is decent. Upbeat retail sales give cues of consumers’ decent savings. The jobs market is also strong.
The equity strategy team at Bank of America Global Research, led by Savita Subramanian, recently commented on the return to the bull territory. It was suggested that this upward trend could reignite investor interest in equities. Cyclical stocks, which include consumer discretionary, should gain.
The Biden administration's favorable policies toward clean energy, such as stricter fuel emission standards and the rollout of more vehicle charging stations, are contributing to the growth of clean energy stocks. This supportive policy environment is accelerating the transition to cleaner energy sources, which in turn is positively impacting clean energy ETFs. A recent rebound in oil prices may also spike alternative energy sources like clean energy.
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5 ETF Areas to Invest in July
The month of July is historically decent for Wall Street. According to moneychimp.com, a consensus carried out from 1950 to 2022 has revealed that July ended up offering positive returns in 43 years and negative returns in 30 years, with an average return of positive 1.12%.
Improving corporate earnings and expectations of slower Federal Reserve monetary tightening bode well for the equity market. In fact, chances of a 25-bps rate hike are currently priced-in. Hence, we do not expect any rate hike in the month to spoil the market momentum.
Investors’ hope that slowing inflation may hold back the Fed from pushing up interest rates in a very hawkish manner can boost equities throughout the month. But then, economists believe that inflation is likely to remain sticky. And given an upbeat GDP data, a strong labor market and an improving housing market, the Fed may feel like keeping rates higher for longer.
Against this backdrop, below, we highlight a few ETF areas that should win in July.
Electric Vehicles
Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report)
SPDR S&P Kensho Smart Mobility ETF (HAIL - Free Report)
The electric vehicle space is charged-up with estimate-beating delivery numbers. Tesla Inc. (TSLA - Free Report) announced a record number of deliveries for the second quarter of 2023. The figures exceed expectations and signal its growing dominance in the electric vehicle market. Rivian Automotive (RIVN) too topped market estimates for second-quarter deliveries on higher production and stable demand for its electric vehicles. Warren Buffett-Backed Chinese EV Maker BYD’s sales almost doubled in June. Its new quarterly record surpassed its prior best.
Homebuilding
iShares U.S. Home Construction ETF (ITB - Free Report)
SPDR S&P Homebuilders ETF (XHB - Free Report)
After an upbeat June, housing ETFs should carry the winning momentum in July too. Homebuilder sentiment has improved considerably. A dearth of existing homes for sale is propelling homebuilders into the limelight despite the prevailing market challenges. This trend, as NAHB’s chief economist Robert Dietz suggests, is likely to persist as potential buyers continue to scout for new construction due to limited available housing inventory. New home listing also marked a significant rise. Plus, chances of a less-hawkish Fed in the future bode well for the sector.
Technology
iShares Semiconductor ETF (SOXX - Free Report)
Invesco DWA Technology Momentum ETF (PTF - Free Report)
The space should do well despite higher rates and an extraordinary first half. The reason behind the expected rally is the AI boom and more activities in cloud computing. The sector is in high demand due to the rapid emergence of technological advancements.
Consumer Discretionary
Vanguard Consumer Discretionary ETF (VCR - Free Report)
Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report)
Ebbing chances of U.S. recession is a positive for investors. The Fed boosted its 2023 economic growth expectations to 1% GDP gain, up from the 0.4% estimate in March. Consumer sentiment is decent. Upbeat retail sales give cues of consumers’ decent savings. The jobs market is also strong.
The equity strategy team at Bank of America Global Research, led by Savita Subramanian, recently commented on the return to the bull territory. It was suggested that this upward trend could reignite investor interest in equities. Cyclical stocks, which include consumer discretionary, should gain.
Clean Energy
ProShares S&P Kensho Cleantech ETF (CTEX - Free Report)
Invesco Solar ETF (TAN)
The Biden administration's favorable policies toward clean energy, such as stricter fuel emission standards and the rollout of more vehicle charging stations, are contributing to the growth of clean energy stocks. This supportive policy environment is accelerating the transition to cleaner energy sources, which in turn is positively impacting clean energy ETFs. A recent rebound in oil prices may also spike alternative energy sources like clean energy.